Euro zone PMIs boost hopes of broad-based recovery

Business activity in the euro zone grew faster than forecast in September, helped by improvements in both Germany and France, boosting hopes for the region's economic recovery.

Markit's flash purchasing managers' index (PMI) on Monday revealed that the euro zone's composite index posted its largest gain since June 2011, rising to 52.1, up from 51.5 in August. It was the sixth consecutive month of higher readings. A reading above 50 denotes expansion.

James Howat, European economist at Capital Economics, said the rise in the euro zone's composite PMI suggests that the bloc's recovery may have gathered pace in the third quarter.

"On the face of it, the index now points to quarterly growth in euro zone GDP (gross domestic product) of around 0.4 percent, after the second quarter's 0.3 percent rise," he said in a note after the data was published.

Growth in the euro zone's manufacturing sector, however, slipped in September. The sector's PMI came in at 51.5, down from August's 27-month high of 51.4.

This slowdown contrasted with activity in the services sector, which expanded at its fastest rate since June 2011 to 52.1 in September.

Howat said the manufacturing data was "more than offset" by this rise in services sector activity, "perhaps reflecting a further pick up in private consumption in the third quarter."

France's activity expanded in September for the first time since early 2012, while Germany's private sector grew at its fastest rate since January.

An improved performance in France's services sector helped to offset a fall in output from the manufacturing sector. Manufacturing numbers for both Germany and France came in below analyst expectations, sending European stocks lower in early trade.

The French September flash purchasing managers index or PMI compiled by Markit rose to 50.2 from 48.8 in August, while the German number edged up to 53.8 from 53.5 in August.